DBS downgraded Nanofilm Technologies to Hold from Buy on weak first half results and the recent resignations of key executives, which have dented investor confidence.
Last week, Nanofilm Technologies reported first half net profit slipped 17.9 percent on-year to S$17.9 million on revenue of S$96.6 million, up 24.2 percent on-year; gross profit margins fell 6.5 percentage points on-year to 46.1 percent, amid higher costs associated with the new Shanghai Plant 2, equipment qualification costs and higher new-product introduction costs, the company said.
On Friday, the company said Ricky Tan Chong Ho resigned from his chief operating officer role after Nanofilm reorganised its reporting structure and assigned responsibility to oversee overall operations and performance of each business unit to the respective heads of those units. After the reorganisation and a period of sabbatical leave for personal reasons, Tan decided to pursue other opportunities, Nanofilm said. In June, CEO Lee Lian Huang also stepped down.
DBS said Nanofilm’s first half results were hit by operational issues and supply-chain disruption, affecting key customers and resulting in a lower-margin product mix.
“Though the second half would be a much stronger half, especially for computer, communication, and consumer (3C) products, the component shortage issue remains a concern,” DBS said in a note Monday. “We prefer to wait for more clarity on the leadership front before we turn buyer again.”
DBS also cut its target price to S$4.18 from S$6.22, based on a price-to-earnings-to-growth ration of 0.83 times, a 50 percent discount to its peers.
Shares of Nanofilm tumbled 10.12 percent to S$3.82 by 4:40 p.m. SGT.